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Sep 19, 2018

Wall Street at Close Report: Dow jumps more than 150 points as bank shares rise


Michael Sheetz, Fred Imbert, Alexandra Gibbs




Stocks rose on Wednesday bank shares got a lift from higher interest rates. Sentiment on Wall Street was also boosted as investors bet that a trade war between the U.S. and China will not be as bad as previously feared.
The Dow Jones Industrial Average gained 160 points with J.P. Morgan Chase as the best-performing stock in the index. The S&P 500 advanced 0.18 percent as financials jumped nearly 2 percent. The Nasdaq Composite slipped 0.06 percent, however, as Amazon, Netflix and Apple all fell.
Bank shares rose as the 10-year Treasury note yield rose to 3.09 percent, its highest level since May. Goldman Sachs and Bank of America both rose more than 3 percent, while Morgan Stanley gained 2.5 percent. Shares of J.P. Morgan Chase and Citigroup, meanwhile, advanced 3.1 percent and 3.7 percent, respectively.
Equities also gained as a new round of levies against U.S. and Chinese products was not as bad as forecasts indicated.
China slapped tariffs on $60 billion worth of U.S. goods on Tuesday. Prior to that, the Trump administration had put levies on about $200 billion worth of Chinese products. However, China will put a 10 percent tariff on some goods it had previously earmarked for a 20 percent levy.
On Wednesday, Chinese Premier Li Keqiang said China was facing "greater difficulties" in keeping its economy stable. He also said: "Deeply integrated into the world economy, the Chinese economy is inevitably affected by notable changes in the global economic and trade context." Li added, however, the Chinese have "sufficient tools" to manage these difficulties.
A trader on the floor of the New York Stock Exchange the morning after the Dow Jones Industrial Average dropped over 1,000 points on Feb. 9, 2018.  
Spencer Platt | Getty Images News | Getty Images
A trader on the floor of the New York Stock Exchange the morning after the Dow Jones Industrial Average dropped over 1,000 points on Feb. 9, 2018. 
Fears of a full-blown trade war between the two largest economies in the world have been a thorn for investors this year as tighter trade conditions could hurt corporate profits. These fears have led to a volatile ride for investors this year. However, stocks are still higher for the year. The S&P 500 is up more than 8.5 percent in 2018 and is less than 1 percent removed from a record.
"Trade tariffs will remain a major concern not only to corporations but to market participants and especially to those professional investors who have never experienced a trade war outside of what they learned in college," said Robert Pavlik, chief investment strategist at SlateStone Wealth.
Pavlik added that while President Donald Trump's approach to trade policy is unconventional, "the U.S. economy is strong, earnings are healthy and confidence among consumers and investors remains high."
Boeing shares rose 1.5 percent while Caterpillar climbed 2.4 percent. Both companies are seen as bellwethers for global trade given their large exposure to overseas markets.
Asian stocks rose overnight, led by gains in Chinese and Japanese shares. Both the Shanghai Composite and Nikkei 225 rose 1.1 percent.
"Markets continue to ignore rising trade tensions, essentially hanging their hat on a 'Trump Tariff Put,'" said Nicholas Colas, co-founder of DataTrek Research. "If stocks begin to worry that the President's policies truly endanger economic and corporate profit growth and sell off, the administration will recalibrate. That works well now; we aren't so sure it will hold next year."
Analysts at Guggenheim hiked their price target on the stock to $420 from $360, implying a 14.2 percent upside from Tuesday's close. "We believe that Netflix subscriber penetration will significantly exceed what is implied in the company's current valuation," the analysts said. The stock rose as much as 2.7 percent before trading flat.
Goldman Sachs shares rose as the company lines up rival banks to take stakes in Simon, its three-year-old app devoted to selling complex investment products.